6-1 Presentation: International Accounting Standards
International Financial Reporting Standards (IFRS) can vary between countries. Differences in cultures cause conflict in accounting methods, but they also lead to accountants in other countries interpreting and applying accounting principles differently.
Mintz and Morris (2013) identified the issues surrounding these cultural values as:
Conservatism
Secrecy
Uncertainty avoidance
Individualism
Power distance
These issues flow down from the broader culture to the accounting profession and its application of financial reporting standards (Tsakumis, Campbell, & Doupnik, 2009). Cultural differences lead to ethical considerations that must be evaluated by the accounting profession. For example, bribery is an acceptable business practice in some countries.
As a result, the global market has adopted a “comply or explain principle” (Mintz & Morris, 2013) to address the cultural differences, leaving the responsibility for the presentation of financial statement data to company management.
U.S. audit reports use the term “present fairly” in describing financial statement data, which means that the financial statements are prepared in accordance with GAAP. International audit reports use the words “true and fair.” Mintz and Morris (2013) point out that this international view may lead to circumventing accounting principles in order to issue “true and fair” financial statements.
FASB and the International Accounting Standards Board (IASB) have collaborated on the development and convergence of international accounting standards. The SEC and other U.S. organizations have somewhat agreed to a plan of convergence, but U.S. businesses are very reluctant because of the consequences involved, not the least of which is cost. And, again, convergence no longer seems to be a priority of the SEC.
References
Mintz, S., & Morris, R. (2013). Ethical obligations and decision making in accounting (3rd ed.). New York, NY: McGraw-Hill.
Tsakumis, G., Campbell, D., Sr., & Doupnik, T. (2009). IFRS: Beyond the standards. Journal of Accountancy. Retrieved from http://www.journalofaccountancy.com/issues/2009/Feb/IFRSbeyondthestandards
https://search-proquest-com.ezproxy.snhu.edu/accountingtaxbanking/docview/2299242719/CACFECD717824E5BPQ/8?accountid=3783
https://www.ifrs.com/overview/General/differences.html
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